UIGEA

An unenforceable law put into effect by ultra-conservative Congressmen aimed at stripping basic liberties away from American citizens.

History of the Law's Birth

The Security and Accountability For Every (SAFE) Port Act of 2006 was a bill of the United States Congress which had online gambling added to it at the last minute.

The SAFE Port Act passed by a 421-2 margin in the House of Representatives and by unanimous consent in the Senate, where it wasn't discussed. The bill was passed in the waning moments of the 2006 Congressional session and signed into law on Friday, October 13th, of that year by President George W. Bush.

Title VIII of the Act is known as the Unlawful Internet Gambling Enforcement Act (UIGEA) and prohibits the transfer of funds from a financial institution to an illegal internet gambling site with the notable exceptions of fantasy sports, horse racing, and state lotteries. Former Senate Majority Leader and noted a-hole Bill Frist (R-TN) is credited with expediting the UIGEA's passage. Frist is now no longer in Washington, D.C. and instead lives in solitude in his Nashville, Tennessee home.

The UIGEA regulations were officially enacted on January 19th, 2009, one day prior to the swearing in of President Barack Obama. The financial services industry must come into full compliance by December 1st, 2009, about one year after the regulations were approved by the U.S. Treasury and White House Office of Management and Budget (OMB). The regulations of the UIGEA were passed as "midnight rules" by the outgoing Bush Administration, which also approved last-minute rules regarding the environment and the Endangered Species Act, among others.

Industry Reponse to the UIGEA

Many online gambling and poker sites, including Party Poker and Pacific Poker, completely withdrew from the United States market and have never returned. Most were publicly traded and departed the market out of deference to shareholders. The membership of the Poker Players Alliance (PPA), the online poker industry's main lobbying group, exploded as a result of the UIGEA's passage and topped one million members in 2008.

Criticism of the UIGEA

Many different agencies and individuals have challenged the UIGEA due to the fact that the law does not define what is "unlawful internet gambling" (the UIG of UIGEA). The onus is on banks and other financial institutions to "prevent to its best ability" the transfer of funds to an illegal internet Gambling entity. With the current state of the banking industry, many in Congress and financial institutions feel this extra burden is the last thing that banks need. Moreover, state and federal laws regarding internet gambling are unclear at best and often in contradiction with each other.

The exemptions of horse racing, state lotteries, and fantasy sports also irritated the online poker industry. Many organizations, such as the PPA have sought to clarify that poker should be treated separately from online casinos and sports book because it is a game of skill. Although separate court rulings at the state level have substantiated the poker as a skill game argument, it has yet to see much momentum on Capitol Hill.

Repealing the UIGEA for Poker

Congressman Barney Frank (D-MA) plans to reintroduce legislation favorable to internet gambling in 2009. During the previous Congress, Frank introduced HR 2046, the Internet Gambling Regulation and Enforcement Act, which established a full licensing and regulatory framework for the industry in the United States. Other bills that may see similar versions reintroduced during the 2009 Congress include the Skill Game Protection Act (formerly HR 2610), which was proposed by Congressman Robert Wexler (D-FL). The bill would have exempted poker, mah jong, bridge, and other player versus player games from all federal legislation, including both the UIGEA and Wire Act of 1961. All legislation not acted upon at the end of one Congressional session must be reintroduced for consideration.

A study by PricewaterHouse Coopers estimated that up to $40 billion could be generated from the internet gambling industry over a 10 year period, although the "actual" total will depend on the number of states that opt out and whether online wagering on sports is permitted..

UIGEA Lawsuits

The vagueness of the UIGEA led to the Interactive Media Entertainment and Gaming Association (iMEGA) filing a lawsuit to declare the Act unconstitutional. iMEGA charges that, in addition to being "void for vagueness," the UIGEA also tramples on individuals' privacy rights and other First Amendment violations.

Judge Mary L. Cooper, a U.S. District Court magistrate, declared in March of 2008 that iMEGA had standing to sue on behalf of the industry. However, she disagreed with many of iMEGA's arguments. Nevertheless, the organization was elated in receiving standing. iMEGA is Chaired by Joe Brennan and based in Washington, D.C. The case is currently in the U.S. Court of Appeals.

World Trade Organization Violations

The Remote Gambling Association (RGA) filed a complaint with the European Commission at the end of 2007, alleging that the United States was usurping its World Trade Organization (WTO) commitments by shutting foreign gambling operators out of the market. In March of 2008, the Commission began its investigation. The RGA's membership includes 888 and Party Gaming, along with a bevy of other publicly traded companies. In September of 2008, European Commission officials arrived in the United States to explore the effects of the UIGEA. A decision has not yet been handed down on whether the WTO will pursue sanctions against the United States.

Separately, the U.S. has entered into agreements with Antigua, Japan, and the European Union as a result of discrimination from the UIGEA. Concessions have affected the international shipping industry as well as U.S. copyrights. The amounts of the settlements largely have never been made public.